The new UK-Australia free trade agreement (FTA) is unlikely to have a direct impact on UK grains producers in the short term, given domestic safeguards for UK farmers and with Australian grains producers focused on larger nearby markets for exports.
UK farmers had voiced concerns that a zero-tariff agreement with Australia could risk undercutting the domestic market with surplus goods — particularly livestock beef, sheep and sugar — from Australia's large-scale agriculture sector.
But competition for barley, the UK's main grain export, is not expected to rise substantially as a result of the trade deal, given strong import demand for Australian product from nearby Asia-Pacific markets and high freight costs to the UK.
Australia exported 5.4mn t of barley in August–April amid a bumper domestic harvest, up from 2.3mn t in the same period last year, customs data show. The rise came despite the country's traditional largest buyer, China, imposing an 80.5pc import tariff on Australian barley in May last year.
Saudi Arabia, Thailand and Japan became Australia's top three buyers of barley in August-April, receiving 2.3mn t, 952,000t and 770,000t, respectively, amid strong demand for livestock feed. This marked a strong contrast with a year earlier, when no barley headed from Australia to Saudi Arabia.
Barley trade between the UK and Australia has remained negligible, with the former sending less than 1pc of its malting barley exports to Australia in 2017-20, as nearby EU markets are its dominant destinations, data from the UK's Agricultural and Horticultural Development Board show.
Similarly, for wheat and corn — the UK's main grains imports — more proximal markets in the EU and Canada dominate supply, while Australia depends on large Asia-Pacific markets for its exports, meaning UK-Australia trade in these products should also remain minimal.
But for livestock and sugar, among the more sensitive of the UK agricultural markets, the government has committed to a gradual rise in the tariff-free quota for Australian products over eight to 10 years, which will minimise any impact to domestic markets in the short-to-medium term.
"While details remain very thin on the ground, it appears that the UK-Australia trade agreement will include important safeguards that attempt to strike a balance between liberalising trade and supporting UK farm businesses, as well as a reasonable time period to allow UK farmers to adjust to the new trading environment," the National Farmers' Union (NFU) of England and Wales president Minette Batters said.
With farmers expecting the deal to form the basis of the UK's next post-Brexit FTAs, concerns remain about ensuring stronger safeguards for deals with nearby markets, such as Canada or the US, that have a greater likelihood of significantly disrupting the UK's domestic industries.
"It is vital the UK government approaches its other negotiations with countries such as the US, Canada and all major agricultural producers and exporters on its own terms, and ensures that future deals balance access to UK agricultural markets with at least the same level of opportunities for British agri-food exports," the NFU said.
The UK-Australia FTA was was agreed in principle on 17 June but the deal is not likely to come in to effect before late 2022, if approved by the both parliaments. Once approved, the UK's Department of International Trade projects that it could increase the overall value of UK exports to Australia by up to £900mn ($1.25bn).
